UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-28407
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NETMAXIMIZER.COM, INC.
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(Exact name of Registrant as specified in its charter)
FLORIDA 65-0907899
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4400 North Federal Highway, Suite 307, Boca Raton, FL 33431
----------------------------------------------------- --------
(Address of principal executive office) (Zip Code)
(561) 447-9330
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Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's Common Stock, $.001 par value,
as of May 11, 2001 was 39,957,149.
NETMAXIMIZER.COM, INC.
INDEX
Page
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Facing Sheet......................................................... Cover Page
Index.................................................................... i
Part I - Financial Information .......................................... 1
Item 1. Financial Statements
Condensed Balance Sheets
March 31, 2001 and December 31, 2000....................... 2
Condensed Statements of Operations
Three months ended March 31, 2001 and March 31, 2000; and
cumulative from inception.................................. 3
Condensed Statements of Cash Flows
Three months ended March 31, 2001 and March 31, 2000; and
cumulative from inception.................................. 4
Notes to Condensed Financial Statements......................... 5-7
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations.................... 8-10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk....................................... 10
Part II - Other Information
Item 1. Legal Proceedings.......................................... 10
Item 2. Changes in Securities .....................................10-11
Item 3. Defaults Upon Senior Securities............................ 11
Item 4. Submission of Matters to a Vote of Security Holders........ 11
Item 5. Other Information.......................................... 11
Item 6. Exhibits and Reports on Form 8-K........................... 11
Signature................................................................ 12
i
PART I - FINANCIAL INFORMATION
This Form 10-Q contains various forward-looking statements and information,
including under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," that are based on management's beliefs as
well as assumptions made by and information currently available to management,
including statements regarding future economic performance and financial
condition, liquidity and capital resources and management's plans and
objectives. When used in this document, the words "expect," "anticipate,"
"estimate," "believe," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to various risks and
uncertainties which could cause actual results to vary materially from those
stated. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, expected or projected. Such risks
and uncertainties include the Company's ability to obtain additional capital to
meet cash flow and working capital needs and to fund future commitments and
operations, to manage inventory to meet potential increases or decreases in
demand, potential adverse customer reactions to delivery delays including
effects on existing and future orders; competitive practices in the e-commerce
industries, changing consumer preferences and risks associated with consumer
acceptance of doing business on the Internet, potential delays or production
problems associated with foreign sourcing of products, the impact of pricing
policies including providing discounts for premium memberships and reliance on
affinity groups. Certain of these as well as other risks and uncertainties are
described in more detail in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000. The Company undertakes no obligation to update any
such factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
1
NETMAXIMIZER.COM, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
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Current Assets:
Cash, including restricted cash of $1,272 $ 33,297 $ 80,448
Inventories 156,114 158,287
------------ ------------
Total current assets 189,411 238,735
Property and Equipment 75,060 80,637
Web Site Design, Net 979,445 521,389
Other Assets 81,863 93,940
------------ ------------
Total assets $ 1,325,779 $ 934,701
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities
Accrued interest, stockholder $ 179,532 $ 134,961
Related parties -- 113,450
Other 439,672 475,728
Due to officer/stockholder 23,046 23,046
Note payable, other 4,696 4,696
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Total current liabilities 646,946 751,881
------------ ------------
Long-Term Debt and Other Obligations
Notes payable, stockholder, net of unamortized discount of $1,375,908
and $1,519,421 605,031 461,518
Deposits on stock to be issued 1,437,388 437,388
Obligation related to stock options to be issued 660,000 660,000
Note payable, other 6,564 7,625
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2,708,983 1,566,531
------------ ------------
Commitments, Contingencies and Subsequent Events -- --
Stockholders' Deficiency:
Common stock, $.001 par value; 75,000,000 shares authorized;
39,203,006 shares issued and outstanding 39,203 39,203
Additional paid-in capital 9,386,029 9,386,029
Deficit accumulated during the development stage (11,455,382) (10,808,943)
------------ ------------
Total stockholders' deficiency (2,030,150) (1,383,711)
------------ ------------
Total liabilities and stockholders' deficiency $ 1,325,779 $ 934,701
============ ============
SEE NOTES TO FINANCIAL STATEMENTS
2
NETMAXIMIZER.COM, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Three Months
Ended March 31, Cumulative
-------------------------------- from
2001 2000 Inception
----------- ----------- -----------
(Unaudited) (Unaudited)
Revenue $ 2,778 $ 4,283 $ 36,543
---------- ----------- -----------
Costs and Expenses:
Direct costs of revenue 2,586 4,445 30,438
Stock and options issued for services -- 321,657 6,363,321
General and administrative 395,908 493,246 2,868,390
Amortization of deferred compensation expense -- -- 964,972
Amortization of web site design 62,639 75,000 476,240
Amortization of debt discount 143,513 74,110 605,031
Interest expense, stockholder 44,571 17,627 183,533
----------- ----------- -----------
649,217 986,085 11,491,925
----------- ----------- -----------
Net Loss (646,439) (981,802) (11,455,382)
=========== =========== ===========
Net Loss Per Share - Basic and Diluted (0.02) (0.03)
=========== ===========
Weighted Average Shares Outstanding 39,203,006 39,153,006
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
3
NETMAXIMIZER.COM, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
Three Months
Ended March 31, Cumulative
--------------------------------- from
2001 2000 Inception
------------ ------------ ------------
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net loss $ (646,439) $ (981,802) $(11,455,382)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of deferred compensation -- -- 964,972
Amortization of discount 143,513 -- 605,031
Depreciation and amortization 85,599 152,008 541,681
Officer compensation -- -- 150,000
Consulting fees paid by stockholder on behalf
of Company -- -- 24,000
Options granted for services -- 321,657 6,163,321
Common stock issued for services -- -- 205,000
Changes in operating assets and liabilities:
Inventories 2,173 (149,974) (156,114)
Other assets (1,000) (39,627) (49,758)
Accounts payable and accrued liabilities (149,507) (7,549) 326,221
Accrued interest, stockholder 44,571 48,354 179,532
------------ ------------ ------------
Net cash used in operating activities (521,090) (656,933) (2,501,496)
------------ ------------ ------------
Cash Flows from Investing Activities:
Expenditures for property and equipment -- (34,933) (59,386)
Web site design costs (525,000) (330,000) (1,060,000)
Other -- 1,503 (6,614)
------------ ------------ ------------
Net cash used in investing activities (525,000) (363,430) (1,126,000)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from long-term debt, related party -- 1,183,975 1,980,939
Proceeds from sales of common stock 1,000,000 -- 1,684,388
Repayments on long-term debt (1,061) (372) (4,534)
------------ ------------ ------------
Net cash provided by financing activities 998,939 1,183,603 3,660,793
------------ ------------ ------------
Net Increase (Decrease) in Cash (47,151) 163,240 33,297
Cash, Beginning 80,448 39,055 --
------------ ------------ ------------
Cash, Ending $ 33,297 $ 202,295 $ 33,297
============ ============ ============
Non-Cash Investing and Financing Transactions:
Equipment purchased in exchange for debt $ 15,794
============
SEE NOTES TO FINANCIAL STATEMENTS
4
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared by the Company pursuant the rules and regulations of the
Securities and Exchange Commission ("SEC") and, in the opinion of
management, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of financial position,
results of operations and cash flows for the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
the rules and regulations of the SEC. The Company believes that the
disclosures contained herein are adequate to make the information
presented not misleading. The statements of operations for the
three months ended March 31, 2001 are not necessarily indicative of
the results to be expected for the full year. These unaudited
financial statements should be read in conjunction with the audited
financial statements and accompanying notes included in the
Company's 2000 Annual Report on Form 10-K for the year ended
December 31, 2000.
The condensed financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business.
Recurring losses from operations and operating cash constraints are
potential factors which, among others, may indicate that the
Company will be unable to continue as a going concern for a
reasonable period of time. The independent auditors' report on the
December 31, 2000 financial statements stated that "... the
Company's recurring losses from operations and current cash
constraints raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty."
The financial statements do not include adjustments relating to the
recoverability and classification of recorded asset amounts, or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The
Company's ability to continue as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its
obligations on a timely basis and ultimately to attain profitable
operations.
Business
The Company is an Internet marketing and merchandising company that
sells an array of products via an e-commerce site. The Company
provides access to an e-commerce department stores primarily to
members of affinity groups such as churches, schools and unions.
Development Stage Enterprise
As described above, the Company was incorporated on June 29, 1995,
and, since that time, has been primarily involved in organizational
activities, developing a strategic plan for the marketing of its
products, and raising capital. Planned operations, as described
above, have
5
NOTE 1. SUMMARY OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
not commenced to any significant extent. Accordingly, the Company
is considered to be in the development stage, and the accompanying
financial statements represent those of a development stage
enterprise.
Net Loss Per Common Share
The Company computes earnings (loss) per share in accordance with
SFAS No. 128, "Earnings Per Share." This standard requires dual
presentation of basic and diluted earnings per share on the face of
the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the diluted earnings per share computation.
Net loss per common share (basic and diluted) is based on the net
loss divided by the weighted average number of common shares
outstanding during the year.
The Company's potentially issuable shares of common stock pursuant
to outstanding stock options and warrants are excluded from the
Company's diluted computation, as their effect would be
anti-dilutive.
NOTE 2. WEB SITE DESIGN
These costs consist of fees for a total of $1,460,000 paid to a
consultant, which is owned or controlled by a major stockholder, as
follows: $1,172,000 to be paid in cash and 56,655 shares of Company
common stock valued at the market value of such stock on the date of
issuance ($5.08 per share) or $288,000.
The following is an analysis of web site design costs by Phase as of
March 31, 2001:
Phase One Phase Two Phase Three Phase Four Total
-------- --------- ----------- ---------- ----------
Cost $350,000 $330,000 $155,000 $625,000 $1,460,000
Accumulated amortization 350,000 82,500 25,833 22,222 480,555
-------- -------- -------- -------- ----------
Unamortized cost $ -- $247,500 $129,167 $602,778 $ 979,445
======== ======== ======== ======== ===========
Phase One of the web site was available for use on November 4, 1999,
and the Company commenced amortizing the cost of Phase One ($350,000)
over an estimated useful life of fourteen months as of that date.
Phases Two and Three were placed in service during 2000, Phase Four was
placed in service in 2001 and are being amortized over an estimated
useful life of thirty-six months.
NOTE 3. RELATED PARTY TRANSACTIONS
Loan and Consulting Fees - Stockholder
In January 2001, the Company received $125,000 in loans from a
stockholder and the Company incurred $75,000 in consulting fees
with a company owned by that stockholder. In February 2001, the
Company paid the stockholder $200,000 as repayment of loans and for
consulting services rendered.
6
NOTE 4. DEPOSITS ON STOCK TO BE ISSUED
On September 13, 2000 the Company entered into an agreement to issue up
to 1,000,000 units, comprised of one share of Company common stock and
one warrant, for $5.00 per unit for total proceeds of up to $5,000,000.
The warrant entitles the holder to purchase one share of Company common
stock for $10.00 for a term of five years. As of December 31, 2000, the
Company received $437,388 for the purchase of 87,477 units. Since these
shares were not formally issued as of March 31, 2001, the amounts
received are classified as deposits on stock to be issued in the
accompanying financial statements.
On February 12, 2001, the Company entered into an agreement to sell
666,666 units, comprised of one share of Company common stock and two
warrants, for $1.50 per unit for total proceeds of $1,000,000. The
warrant entitles the holder to purchase two shares of Company common
stock for $1.875 per share for a term of five years. The Company
received $1,000,000 of proceeds on February 14, 2001. Since these
shares were not formally issued as of March 31, 2001, the amounts
received are classified as deposits on stock to be issued in the
accompanying financial statements.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Our primary objective for the next twelve months is to raise sufficient
capital to permit us to commence full operation of our Internet development,
marketing and merchandising company to provide (i) turnkey, individually
branded, e-commerce department stores to affinity groups such as churches,
schools and unions and (ii) redemption centers for recipients of premiums from
various merchants. If we are successful in raising that capital, we will:
o Increase our marketing efforts with the affinity groups to encourage
their membership to shop at their own affinity store and purchase an
array of products and services for which the affinity group will
receive a portion of the proceeds of every member purchase.
o Reach agreements with merchants to "reward" their customers for various
activities with premium incentives and establish a branded site for
each participating merchant and their customers may redeem incentive
vouchers for premiums through that site.
o Launch our full-scale operation and provide an e-commerce department
store that will serve as the fulfillment vehicle for the Affinity
Stores and the Redemption Centers.
Material Changes in Results of Operations
We remain a development stage company. As of March 31, 2001, the Company
continued organizational activities and raising capital. Full operations, as
defined by our strategic plan, have not commenced.
For the three months ended March 31, 2001, we had revenue from operations of
$2,778, as compared with revenues for the same period ending March 31, 2000 of
$4,283. Because neither of these figures represent the result of active business
operations, no meaningful comparison can be made between our present operations
and our operations during the same quarter of last year.
For the three months ended March 31, 2001, we had revenue from operations of
$2,778, $4,283 for the same period ending March 31, 2000 and $36,543 cumulative
from inception. During the three months ended March 31, 2001, we had no
significant active business operations. As a result, we had no material
transactions or results of operations that require a comparison to our
operations during the three-month period ended March 31, 2000. Because we have
not begun actual operations as of this date, we consider these revenue numbers
to be immaterial. During the three months ended March 31, 2001, we incurred
general and administrative expenses of $395,908, as compared to $493,246, for
the three months ended March 31, 2000. These costs were incurred primarily in
the continued development of an infrastructure to operate the business pursuant
to our business plan.
8
Material Changes in Financial Condition
Our total assets were approximately $1,325,000 at March 31, 2001 compared with
$935,000 at December 31, 2000, and $1,078,000 at March 31, 2000. During this
first quarter, our inventory, property, and equipment have remained relatively
constant. We have increased our investment in web site design by more than
$450,000, principally to allow for the establishment of our redemption centers
as described in our annual report on Form 10-K for the year ended December 31,
2000. Our cash and short-term investments were $33,297 at March 31, 2001,
compared with $80,448 at December 31, 2000, and $202,295 at March 31, 2000. Our
current liabilities were $646,946 at March 31, 2001, compared with $751,881 at
December 31, 2000, and $74,110 at March 31, 2000. This increase was principally
the result of operating costs.
Liquidity and Capital Resources
As of March 31, 2001, we had approximately $33,297, in cash. We intend to raise
additional capital through additional sales of unregistered shares of our common
stock conducted under exemptions provided by the Securities Act or by the rules
of the SEC. We also intend to fund a portion of our inventory expansion by using
lines of credit, which may be secured by such inventory. There can be no
assurance that we will be able to raise additional capital or obtain
line-of-credit financing on favorable terms and in the time required. If we are
unable to meet the requirements necessary to finance our inventory expansion,
our implementation plans could continue to be severely and adversely impacted,
and it is questionable whether we could continue as a going concern. We
anticipate that our cash requirements will continue to increase during the
remainder of calendar year 2001 as a result of salaries, professional fees and
related expenses associated with the anticipated expansion of our operations.
There can be no assurance that our actual expenditures for such periods will not
exceed our estimated operating budget. Actual expenditures will depend upon a
number of factors, some of which are beyond our control, including, among other
things, reliability of the assumptions of management in estimating costs and
timing, and the time expended by professionals and consultants and fees
associated therewith.
Recent Financing
On September 13, 2000, we entered into an agreement to issue up to 1,000,000
units, comprised of one share of our common stock and one warrant, for $5.00 per
unit. The warrant entitles the holder to purchase one share of our common stock
for $10.00 for a term of five years. As of December 31, 2000, when that
agreement had expired according to its terms, we had received $437,388 for the
purchase of 87,477 units. Since these shares were not formally issued as of
March 31, 2001, the amounts received are classified as deposits on stock to be
issued in the accompanying financial statements. The shares were issued on April
5, 2001, and are included in the number of outstanding shares reported herein.
On February 12, 2001, we entered into an agreement to sell 666,666 units,
comprised of one share of our common stock and two warrants, for $1.50 per unit
for total proceeds of $1,000,000. The warrant entitles the holder to purchase
two shares of our common stock for $1.875 per share for a term of five years. We
received $1,000,000 of proceeds on February 14, 2001. Since these shares were
not formally issued as of March 31, 2001, the amounts received are classified as
9
deposits on stock to be issued in the accompanying financial statements. The
shares were issued on April 3, 2001, and are included in the number of
outstanding shares reported herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On January 9, 2001, Charles Aker filed suit against the Company,
alleging that he is owed compensation under an agreement dated June 7, 1999,
pursuant to which Mr. Aker was to have enhanced the Company's image and promoted
the Company's stock for a minimum period of twelve months. The compensation in
the agreement, as amended by an addendum dated the same date as the original
agreement, called for the issuance of options to purchase up to 276,432
(pre-split) shares of our common stock at a purchase price of $10.00 per share,
a monthly fee of $6,000 plus reimbursement of expenses. (Giving effect to the
three-for-one stock split that has subsequently occurred, this would equate to
829,296 shares at an exercise price of $3.33 per share.) The stock options were
never issued, however, which is the likely reason Mr. Aker is seeking "specific
performance" of the promise to issue the options. Specific performance is an
equitable remedy, against which the Company has asserted the complete defense of
unclean hands, based on Mr. Aker's alleged fraud. The Company has counterclaimed
for fraudulent inducement and breach of contract, seeking rescission of the
contract and restitution of all funds previously paid to Mr. Aker. No formal
discovery has yet been done on the merits, if any, of Mr. Aker's claims.
Although the Company believes that Mr. Aker's claims are wholly without merit,
at this early state of the litigation, management cannot assess the likely
outcome of the litigation or whether the outcome will materially impact the
Company's financial condition or results of operations. The Company intends to
vigorously prosecute its action against Mr. Aker and to vigorously defend the
actions against it by Mr. Aker.
From time to time, the Company is a party to routine litigation
incidental to its business. Management does not believe that any of these
pending legal proceedings and that listed above, individually or in the
aggregate, will materially impact the Company's financial condition or results
of operations.
Item 2. Changes in Securities
On September 13, 2000, we entered into an agreement with Carousel
Investments Ltd. to issue up to 1,000,000 units, comprised of one share of our
common stock and one warrant, for $5.00 per unit. The warrant entitles the
holder to purchase one share of our common stock for $10.00 for a term of five
years. As of December 31, 2000, when that agreement had expired according to its
terms, we had received $437,388 for the purchase of 87,477 units. Those shares
were issued on April 5, 2001. The sale was exempt from registration in reliance
upon Section 4(2) of the Securities Act since it did not involve a public
offering.
10
On February 14, 2001, we entered into an agreement with Consensus
Investments Limited to issue 666,666 shares of our common stock and warrants to
purchase an additional 1,333,332 shares of our common stock, for a purchase
price of $1,000,000.00. The warrant entitles the holder to purchase the common
stock at an exercise price of $1.875 for a term of five years. The sale was
exempt from registration in reliance upon Section 4(2) of the Securities Act
since it did not involve a public offering.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Index and Exhibits
None
(b)The following reports on Form 8-K have been filed by the Company during
the last quarter of the period covered by this report:
None
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 2001
NETMAXIMIZER.COM, INC.
/s/David A. Saltrelli
-----------------------------------------
David A. Saltrelli, President
President
/s/Peter G. Schuster
-----------------------------------------
Peter G. Schuster, Treasurer
Chief Financial Officer
12